Australia's Falling Living Standards

Ok for those who havent met me - I am a pretty chipper guy. Always look for the upside and am pretty upbeat about most things! I also believe in property investing for wealth creation because, as others have said, people will always need to put a roof over their heads.

When the economy wobbles and people need to hustle to get by when no payrises are given as living costs rise, housing and feeding their families are the two things they will secure first. The Bali holidays, new iPhones with every model-release, $25 friday night cocktails, latest trendy hipster (dear god is that still a thing??) Clothing and shoes, and Wednesday lunchtime $20 gourmet burgers will all be - of course - the first things they'll sacrifice when clouds start to loom.

But where I take interest is in that murky next stage. If prospects continue to look glum, further sacrifices get cut (all of these wil be sacrificed before groceries and paying the rent); stitching together a winter jacket with holes to make it stretch to another season; switching from branded supermarket goods to no name; cutting their $11 netflix account; taking kids out of paid childcare and handing to gran and pop for minding etc.

All of this will happen before they downgrade their rental property. Even then, they'll downgrade only from say a 3-bed with mod-cons for $500pw closer in, to a basic 3-bd a bit further out for say $400pw etc.

Most investors dont play in the upper-emd markets. Sad to say it but holding IPs in that middle-Australia market is actually pretty secure in tough economic times (providing there is interest rate modesty!), because rents will always be prioritised above trinkets by tenants.

Where I am not so chipper is this (and slightly horizontally off topic) idea that the human workforce is being rapidly automated. And it is affecting ALL areas of employment (not just the low-end, basic manual labor jobs). If you watch this 15 minute doco on YouTube called Humans Need Not Apply, it summises my concerns perfectly!

I guess I am concerned because ideally, automation would take over all jobs/work in the world and this would free up Humanity's time to shift to a money-free/money-not-necessary "Star Trek-ian" utopia world where we can work for passion and the betterment of humanity, instead of money.

Sadly though the inherent nature of humanity (greed, control, capitalism) makes this future unlikely. Which is scary because automation replacing much of the workforce IS likely. Maybe thats why Switzerland experimented with the idea of paying their people a basic human wage regardlezs of whether they choose to work or not. Kinda communistic in a way? The idea was put to a vote and was voted against.

Bringing this back to the OP and the charts... we all think in Australia we are competing against cheaper countries now for jobs, because their labour is cheaper than us. Maybe this is true for today. But it is feasible tha in our lifetime we will not compete with each other (i.e. humans) for jobs, but with robots (who will almost always come out on top in everything they do).

 

There are plenty of jobs where robots will never take places of humans.

 

Perhaps off topic..sort off

Cry me a river, try living in Perth, coming to terms with the fact that mining boom is over, We are most expensive State to live in

 

Used to be that the last thing that went was the 'little luxuries' .
In the 1980's recession we had to have, people made a fortune selling luxury lipstick.. think about it Cut all budgets, it feels good to have a bit of lippy!

 

By what metric?.. certainly not if you include housing costs.

 

I was actually referring to a recent article in West Australian where it identified Perth as most expensive State to live in, I tried to locate, can not, perhaps someone else can, I think it was Monday story.
BTW, nothing to do with housing cost, living costs

Check this out in the meantime.


Cost of Living Comparison Between Melbourne, Australia And Perth, Australia

 

Call me skeptical but I have been working in the perth office for the last 3 months but live in Sydney. I think Perth used to be the most expensive place but suspect thats an old paradigm. For example from that link I find it hard to fathom that perth rents would be more than Melbourne considering the plummeting price of perth rents in the last couple of years.

 

I have my story too, I just got back from Melb where my daughter now lives and she can not believe how cheap Melb is compared to Perth, ie food, living expenses

The report on news regarding Perth and also dining out stated that Perth does not have the population and that is why we pay through the nose.

How wages are higher?? perhaps, not sure anymore, with the boom long gone, perhaps the wages are now sliding

 

In my experience, tenants keep buying the shiny trinkets and their Winnie Blues and they choose not to pay rent instead. Not everyone is honourable, especially in these lower end markets

 

In my experience tenants keep buying houses to live in, which is really annoying because they are always my best tenants. Oops... should have posted in #firstworldproblems

 

....out of adversity comes opportunity......

Frankly...I find we Australians have become a lazy whinging lot....the affluenza of the last 20 years. has caused us to become a narcisstic lot.

It is not all apples but it is not all gloom either.....as some jobs go there are others which cannot be automated.

As I have said fix the mind and opportunities appear......I work in industry ..where there a lot of deluded people think that overseas labor is inferior...when the facts actually show the reverse.

Adapt or perish.....hangon...I don't want everyone to change.

 

Sash it is timely you should mention affluenza.

I happen to be reading a great book (well, two books; the author just wrote a sequel of sorts), called Affluenza, by Oliver James.

It chronicles this very 20 year trajectory and delves into research by psychologists, economists, and sociologists alike in its findings.

Well worth a read.

 

Yep......

Australians as a whole are now 2nd only to the Swiss in terms of wealth.

The next 20 years will be painful for the Baby Boomers as they loose power (mostly due to their numbers dwindling due them passing on)......if they are not financial secure life will get tough.

It will be even tougher for Xers as they continue to work to 70....

 

Yep.
Unemployment benefits and pension rates used to be similar, but began diverging in 1997 when the Howard government indexed pensions to moves in male total average weekly earnings but left NewStart indexed to the consumer price index.

In the future the Aged Pension will get pegged against CPI instead of the male total average weekly earnings, which will see the living standards of pensioners fall.

Newstart Allowance - Australian Government Department of Human Services
Newstart is $527.60 a fortnight

Age Pension - Australian Government Department of Human Services
Aged pension is $794.80 a fortnight

Currently pensioners receive $267.20 a fortnight more than the unemployed. The rhetoric in the future will be that pensioners are welfare recipients who either ****** their money away or were poor planners etc.

 

Great point.....that subtle change will be felt a lot in about 20 years.....unless inflation there is a big jump in inflation.

 

Surely that may be getting cheaper as people leave or stop spending? Eg price drops to still get costumers

 

You'd think so but... No.

 

Wages growth has stagnated at a national level, over the past few years.

This looks set to continue. Even the construction boom looks like it'll start dying soon. In Domain today there was a piece about the rapid slowing of big resi development approvals. Why? The baffoons who want to keep building these 100+ apartment block nightmares keep asking for loans - and lenders are now finally saying no! "No, you can't have $20 million to build another useless tower next to a bunch that are already becoming vertical ghettos".

For once the banks are doing something right - sensible lending is finally being applied not only to us folk who buy one or two individual properties at a time, but to moronic "build 100, and they'll come... right?... right??" developers.

This cooling of development will have a big down side for our economy though. Many of those yellow, orange, and green hi-vis shirt-wearing construction folk will sadly have to find new jobs. But much like the wind up of the mining boom before it, where will these folks find new jobs when construction employment winds up? Can't go into factory and manufacturing because we've outsourced that sector. Can't bag groceries at Woolies because we've near-automated those kinds of jobs. Flipping burgers at Maccas, perhaps? Even those jobs are starting to go, as the self-serve touch screens get wheeled into more and more fast food joints. Maybe specialist jobs that arent too hard to learn? I.e. becoming a pest inspector, a gardener, etc.

More likely than the above; they will need to "re-skill" into more "officey, professional services, mental-gymnastics" kinds of jobs. That'll require potentially years of tertiary education to do that. Oh, and what awaits them upon graduation? If they are lucky, an unpaid-internship gig that **might, but not guaranteed** turn into a paid job. Which, by the way, is an entry-level, $35K per year job, where they'll fiercely compete against other grads.

 

This is exactly why we should be taking a long hard look at our immigration policies, as it is not sustainable in the long term. I'm amazed that Sustainable Australia gained so few votes at the last election.

Can't people see where we as an economy essentially built on property speculation, with a propensity for assets to be flogged to foreigners, and with with no Plan B are heading???

Why bring more people here when there will be fewer jobs to go around in the future?

• Mining - boom winding down, China has other sources of rocks, like in Africa where it has many fingers in many pies...
  
• Manufacturing - kaput.....
• White Collar jobs - increased automation/offshoring at the lower end, and with the inevitable march of technology, there is no doubt that even current middle level roles could well be automated.
  
• Service Industries (incorporated with White Collar above): Places like the Philippines, India and South Africa have a lot of educated English speakers (even if sometimes they are hard to understand) and they remain willing to do similar work for less pay than their Australian counterparts. Well remunerated CEOs love the sound of this and its only going to continue...
  
• Innovation: well....Australia does not have a great track record in this department, yet the development of value added high level innovation is most probably the way forward for us. I recently read that most of the largest companies in the US are IT based like Apple etc, yet the largest Australian companies are essentially old school like BHP and were established many decades ago. It seems that most Australians with ideas in Science and Technology have to go to the US to get venture capital
• Primary Production: we've been doing this like forever, but farms jobs are obviously located away from cities, and even if we all had to work there because all the white collar and service and manufacturing jobs had disappeared, there wouldn't be enough jobs even if it wasn't for farm automation. (and one would hope the gumbyment will not allow our food bowl to be sold to foreign interests...)